1) We place a lot of emphasis on employee education. Because of the thorough nature of our FSA communication practices, employees with qualified dependent care expenses are simply more comfortable using a TAG flexible spending account.

2) Our Continual Reimbursement option. Since most child care providers do not accept debit cards as a form of payment, participants with childcare expenses are forced to pay their provider with after-tax money and then submit for reimbursement from their flex account. This creates a cash flow problem for many rank and file employees.

Example: Jane Smith knows that using a dependent care spending account will save her $125 /month and $1,500 /year in child care expenses (30% of $5,000). However, Jane chooses not to participate because she can’t afford to redirect $200 of every paycheck into a flex account and also pay her child care provider at the same time. Jane is essentially paying for the service twice, before submitting for FSA reimbursement and then receiving her tax benefits. It is a simple cash flow dilemma that hinders Jane and many other rank and file employees from participating.

Solution: To eliminate the cash flow problem for participants like Jane, we use a process called ‘Continual Reimbursement’. At open enrollment Jane provides us with her cost of child care and the Tax ID number of her child care provider (or SSN if the provider is not a child care facility). She then takes our continual reimbursement form to her provider for endorsement. This form now acts a receipt for the entire plan year. Jane no longer needs to submit receipts to TAG for reimbursement. Every payday Jane’s dependent care FSA contributions are automatically directly deposited into her checking account – same day!

Our Continual Reimbursement process removes the cash flow obstacle for thousands of employees and allows them to take advantage of their company sponsored FSA plan.

To learn more about Continual Reimbursement and other unique aspects of TAG FSA plans, give us a call. We’d love to hear from you… (877)506-1660

]]>https://www.enrollwithtag.com/child-care-fsas-part-2-of-2/feed/0Dependent Care FSA’s – Part 1 of 2https://www.enrollwithtag.com/dcap-101-part-1-of-2/
https://www.enrollwithtag.com/dcap-101-part-1-of-2/#respondMon, 18 Jul 2011 23:33:39 +0000http://www.enrollwithtag.com/?p=777Continue reading →]]>Preface: this entry is a bit long, but this question is asked all the time and this should help most people…

Child Care Tax Credit vs. Dependent Care Spending Account? The answer depends on who is asking the question. However, in almost all cases, you should contribute to a spending account if:

1) You have a household income greater than $25,000.

2) You live in a state with state income taxes.

3) You have a household income greater than $25,000 and live in a state with state income taxes.

Example: John and Jane Smith pay $400 per month or $4,800 per year to their daughter’s daycare provider. The Smith’s adjusted household gross income (AGI) is $45,000 per year.

Child-Care Tax Credit

• The Smith’s AGI of $45,000 per year puts them in a 20% bracket as it relates to the child-care tax credit.

• Only $3,000 of their $4,800 in child-care expenses is considered eligible.

• The maximum child-care tax credit for The Smith’s is $3,000 multiplied by 20% = $600. They also receive 43% of the $600 tax credit on their CA state return for an additional $258.

• Total tax savings = $858

Dependent Care Spending Account

• The Smith’s pay just over 28% of their income toward taxes (15% federal income tax, 8% CA state income tax and 5.65% FICA tax*).

• All $4,800 of their child-care expenses is considered eligible through flexible spending.

• By using a dependent care spending account, The Smith family saves 28% of $4,800.

• Total tax savings = $1,344.

Conclusion: The Smith’s make an additional $486 per year by using a dependent care spending account compared to the child care tax credit.

I have more thoughts about dependent care spending accounts, so hang tight for part 2 of this entry. In the meantime, if you want to talk about your FSA plan we’d love to hear from you… (877)506-1660.

* The employee matching portion of social security was temporarily reduced in 2011 from 6.2% to 4.2%. The standard 1.45% medicare and 6.2% social security should be reinstated in 2012 (4.2% + 1.45% = 5.65% employee FICA tax).

]]>https://www.enrollwithtag.com/dcap-101-part-1-of-2/feed/0A Better FSA Planhttps://www.enrollwithtag.com/increase-participation-in-your-fsa-plan/
https://www.enrollwithtag.com/increase-participation-in-your-fsa-plan/#respondThu, 02 Jun 2011 22:59:29 +0000http://www.enrollwithtag.com/?p=572Continue reading →]]>Why do some FSA plans have great employee participation, while others seem to garner little interest from employees? There is no stock answer to this question, but there are many factors that can cause participation to rise or fall. Focusing on just a few however can be the difference between “Wow! Our FSA plan is great!” and “Why do we even offer FSA’s?”

1. Flexible spending accounts can be complicated for new participants. Relying on group meetings for employee education can be a recipe for disaster.

2. Educating employees individually is a viable and powerful option for most organizations. You will be surprised by how many employees elect to participate in your plan when they are comfortable using an FSA.

3. Treat your FSA plan as an income producing source. A little bit of extra attention toward your plan can be the difference between $5,000 of annual tax benefits and $50,000!

If you would like to discuss the power of your FSA plan, feel free to call our offices any time… we’d love to hear from you.